The Lazarus Corporation

The Future of Music - Radiohead & Left Hand Red

There’s been a lot of analysis about Radiohead‘s “pay what you think it’s worth” new album digital release at the tail end of last year.

Much of the comment was positive – which I’m generally in agreement with because I think Radiohead made a good move.

Most of the handful of detractors (mainly people who had a financial interest in propping up the dying business model of the music industry, it has to be said) made the argument that while this was all very good for Radiohead because they had already benefited from the mass-marketing machine of the music industry – in other words, the buzz required to generate the critical mass of fans prepared to gamble money on a collection of mp3 files (when they could pay nothing if they wanted) could only have been possible because the music industry had already done all the necessary work over the past few years.

This argument is based on a number of false assumptions.

Firstly, it presumes that a “critical mass”of fans is a requisite for this business model. Well, only if you’re still stuck in the world of blockbuster hits being the only indicator of “success”. The music industry requires blockbusters because that’s the only way it can get a return on the phenomenal amount of cash it burns on marketing, because it needs a blockbuster hit… it’s a vicious circle. Of course, if you stop concentrating on trying to manufacture a blockbuster hit and look instead at long tail economics then all this becomes obsolete.

Secondly, the music industry is fixated on marketing product to consumers. What Radiohead did was to offer music to fans and invite them to contribute. That’s not just a pedantic change in terminology, it a fundamental paradigm shift (although not a brand new one – many small bands have been doing this for decades. Buskers rely on it.)

So, after all the focus on Radiohead, let’s look at a small unsigned band who are creating their own business model:

Left Hand Red are a Brighton-based indie-rock quartet (whose bassist happens to be my friend and web-design colleague Barry Bloye) who are trying a number of strategies.

They’re using the obvious tactics – their own website, a MySpace page, discussion forum, permission-based email mailing list, and a selection of free MP3s to download – but Left Hand Red don’t want to remain penniless musicians for ever so they’ve put their 3-track CDVoyeur on sale on their site (using Google Checkout, which doesn’t take too large a cut of micropayment-sized transactions) for £1 plus 80p P&P.

But the ingenious part of this strategy is that:

We’ve agreed to charge for the CD to recoup costs, but to give them away at gigs, as anyone who comes to see us deserves something for their time (and hopefully it will encourage people down). No-one’s mentioned downloads, but as they don’t have any overheads, I will sneak them up on the site free of charge.

Looking at this strategy, the essential calculation that Left Hand Red have made is that a person who comes to a gig is worth investing in (the cost of this investment – a free CD). This comes from three realisations:

A fan is a customer who has invested their time and attention in you, and you should invest in them.

A fan is worth more than 100 customers.

A fan participates in your community (whether that community is a discussion forum or the crowd at your gig) and recommends you to their friends.

There are also some immediate financial benefits to this model. Like most small bands, Left Hand Red get paid to play gigs. If they get paid a fraction of door-takings or bar-takings, then encouraging fans to come to gigs by offering them a free CD when they get there gives the band an increased income due to larger crowds. And then they have the opportunity to turn the people in those crowds into participating fans (much easier when they’re already participating by attending a gig!).

Digital piracy doesn’t disrupt this business model – in fact, the “piracy” of their MP3s is good for the band. If digital copies of their new CD are circulating on P2P networks then that increases the chance that people will hear them and come to a gig, and become participating fans.

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